Upper tribunal considers validity of termination notices

EE Ltd and another v Edelwind ltd and another [2020] UKUT 272 (LC)

In this case the land owner sought to end code agreements allowing the operation of telecoms apparatus on the property's roof.

The property was let to a tenant on a long lease. The operator had an agreement in place with the tenant granting code rights and a further agreement with the land owner under which the landlord consented to the rights being granted and agreed to be bound. The tenant served a break notice seeking to end its occupation of the property and the landlord claimed that once the tenant had vacated it would re-develop the roof.

The code agreements were not due to expire until several years after the tenant's break date. It was agreed that, although the termination of the tenant's lease would bring an end to the code agreements, paragraph 30 of the code would cause the code rights to continue in the absence of a valid paragraph 31 notice.

Both the land owner and the tenant served paragraph 31 notices on the operator in order to prevent continuation under paragraph 30. The notices were expressed to terminate the code agreements after the break date.

The Issues

The operator argued that the notices were premature as the tenant's break clause required various conditions to be fulfilled and it could not be said on the balance of probabilities that the tenant's lease would terminate before the notices expired. The land owner and the tenant could therefore not rely on paragraph 31, which required any notice to expire after the code agreement would have ended. The land owner argued that the tribunal need only be satisfied that the lease would probably end on the break date.

The operator also argued that the notices were invalid, as it had assigned the code rights to itself and another operator and that the other operator had not been served by the notices. The Landlord argued that as the code agreements were licenses they were incapable of assignment in breach of covenant.

The Decision

Deciding the matter as a preliminary issue, the Tribunal agreed with the operator that the land owner would need to show on the balance of probabilities that the tenant's lease would terminate before the expiry of the notice. However, the tribunal found that this standard of proof could be satisfied in the current case. In particular it found that, where there is no evidence of bad faith, it is likely that a tenant serving a break notice wishes to end a lease and thinks it will be able to comply with any conditions.

The tribunal also found that the agreements were licences rather than leases and accordingly could not have been assigned in breach of covenant. The tenant had unrestrictive access to the roof, except for certain exclusion zones, whereas the operator was only permitted to access the roof within certain hours. Accordingly there was no right to occupy, let alone a right to exclusive possession and the code agreements were not leases.

Comment

Land owners and tenants seeking to exercise break clauses (especially where such a break is conditional on vacant possession being given) might be dismayed by the tribunal's decision that the higher standard of proof applies when establishing that a lease will end on the specified break date. However, it appears from this case that, in the absence of evidence to the contrary, the tribunal is likely to find that once a break notice has been served, the conditions will be met and the notice will be effective.

It will be interesting to see how the tribunal deals with the follow up issue: whether the land owner can make out the paragraph 31(4)(c) ground.